Economist says recession would make deficit worse

.ST. PAUL (AP) – A national recession would hit Minnesota worse than prior downturns and make a projected budget deficit worse, State Economist Tom Stinson said on Wednesday.

Stinson told lawmakers that Minnesota doesn’t have strong defense and energy exploration industries to smooth out other economic difficulties. In addition, the poor housing market has hit the state’s wood products industry.

He briefed lawmakers on a report from economic consultants Global Insight, which believes the U.S. will be in a recession for the first half of this year.

A recession now would hit Minnesota harder than other recent slowdowns, he said, “certainly harder than the recession of 1990-91 which pretty much bypassed the state. This is going to slow down the state’s economy. We are going to lose a year of growth and employment and wages here almost certainly and it could be a little more severe than that.”

In November, state finance officials projected a $373 million deficit in the state’s two-year budget. That projection assumed a weak economy. Stinson said it’s too soon to know how much weaker than expected Minnesota’s economy will be.

A new state budget forecast is due by early March. “Almost certainly the deficit is going to be larger than it was in November,” Stinson said.